Arthur Online is seeing growth of HMO`s in the buy-to-let market
Traditional buy-to-let, where someone buys a two-bedroom flat and lets it to a single professional or couple, doesn’t stack up the way it once did. Two pieces of research published this week showed the effect high property prices are having on landlords’ returns, especially in London and the South East, where prices have been rising at double-digit rates. Property group Knight Frank said yields in London (that’s rent against property price, before any costs are considered) stood at 4.3pc.
BM Solutions, Britain’s biggest landlord lender to the buy-to-let market, published research based on real landlord borrowers, putting the figure at 5.7pc. After mortgage interest, maintenance and other costs, the net return to landlords could easily be nothing, or a loss.
The problem is that while property prices have galloped upwards, tenants’ incomes have not increased on any similar scale – and hence rents have met a ceiling.
A piece of research showed, an update to the English Housing Survey produced by the Department for Communities and Local Government, it was found that tenants in the private rented sector spend the equivalent of two days of their weekly wage on rent. That’s twice as much as average home owners spend on their mortgage. Renters just can’t afford to pay more. With that as the backdrop, it’s getting harder for property investors to make a turn.
The answer? The outcome as shown by the market is that properties shrink and become more crowded, Hong Kong style, as Britain adjusts to its growing population and legacy of inadequate homebuilding. Authorities in city boroughs are increasingly having to intervene where they deem properties “too small” as owners convert lofts, garages, sheds and other outbuildings into tiny lets, with or without consent.
A north London borough last month prevented the letting of a studio flat because it was too small to be safe, even though tenants had been found within hours of the property (a room, barely big enough for a small bed) being marketed at almost £200 per week.
At Arthuronline we cater for many buy-to-let landlords which hold HMO`s. We are seeing a trend of increasingly good quality accomodation on the market, often with Free Wifi, Flat screen TV`s, good quality kitchens and bathrooms. HMO Landlords are increasingly embracing technology to manage their portfolio. Good technology will play its part in improving tenant retention and improving yield.